Thursday, June 9, 2011

In the period since the Federal Reserve announced in November that it intended to buy $600 billion in U.S. government debt by the end of this June, the Fed has surpassed mainland China as the top owner of publicly traded U.S. Treasury securities.

As of the end of March, according to data released by the Federal Reserve and the U.S. Treasury, the Fed owned $1.333 trillion in U.S. Treasury securities and the Chinese owned $1.1449 trillion. U.S. Treasury securities are the bills, notes and bonds sold by the Treasury Department to finance the debt of the U.S. government.The $2.4779 trillion in U.S. Treasury securities owned by the Federal Reserve and the Chinese combined as of the end of March equaled 25.7 percent of the publicly-traded portion of the federal government's debt (which stood at $9.6516 trillion at that point).

The full U.S. national debt--which includes both the publicly traded debt and non-publicly traded “intra-governmental” debt that the U.S. Treasury owes to government trust funds such as the Social Security trust funds--stood at $14.270 trillion at the end of March and at $14.3447 trillion as of the close of business this Monday.in August 2010 the Fed started marginally increasing its holdings of U.S. debt, according the Fed’s monthly balance sheets. By the end of August, the Fed owned $784 billion in U.S. debt. By the end of September, it owned $812 billion. And by the end of October, it owned $838 billion.

During these three months, the mainland Chinese also increased their holdings of U.S. Treasury securities, bringing them to a peak of $1.1753 trillion by the end of October.But in November 2010, the Chinese began drawing down their holdings of U.S. Treasury securities.

That same month, the Fed announced it would significantly increase its own holdings of U.S. debt by buying as many as $600 billion in U.S. Treasury securities by the end of June 2011.

Of the $1.413 trillion in Treasury securities the Fed owned at the end of April, according to the Fed’s latest monthly report, $18 billion were in short-term Treasury bills that mature in one year or less, $65 billion were in Treasury Inflation-Protected Securities that mature in terms of 5, 10 and 30 years, and $1.33 trillion were in Treasury notes and bonds. Treasury notes mature in terms of 2 to 10 years and bonds mature in 30 years.